A Shaky Retirement System

Less-Prepared Americans are Still Retiring Earlier Than They Should

In 2013, the most recent year for which numbers are available, the “National Retirement Risk Index” improved after two decades of getting worse.

Don’t get too excited: The improvement was 1 percentage point, and the index still found that 52 percent of U.S. workers may be underprepared for retirement.

Those are the findings from research by the Center for Retirement Research at Boston College (website, Twitter), which has been tracking American’s savings habits and retirement planning for years. The research forms part of “Falling Short: The Coming Retirement Crisis and What to Do About It” (Amazon), co-authored by the center’s Andrew Eschtruth, who shared the findings with National Press Foundation fellows.

The retirement risk index details whether people will fall significantly short in producing enough income in retirement to maintain their pre-retirement standards of living. In the late 1980s, 30 percent of U.S. workers were at risk; in the 2010s, it’s been more than half.

Why? For starters, the length of an average person’s life has expanded a lot while their working career has expanded only a little. The mismatch means they’re not putting enough money away during their working years to cover their so-called golden ones.

In addition, health care costs are increasing, and interest rates – particularly since the financial crisis of 2008 – are next to nothing. Earlier generations might have been able to rely on steady interest payments from a modest nest egg; today’s generation can’t count on that.

Finally, the self-directed retirement system that has emerged in the past three decades is open to abuse and mismanagement by the very individuals it is designed to help. For example: Despite warnings to not swipe money from 401k balances until they actually retire, plenty of people do. The experts call that “leakage,” and it means people’s savings might have largely leaked out by the time retirement comes around.